10Y annualized return is
positive but below market average
at 0.4% per year
AKAM has met or exceeded earnings expectations in
most
recent quarters (9/10)
Reasonable Price-to-Earnings Ratio
Strong Price-to-Sales Ratio
Strong Gross Profit Margin
Solid Return on Equity
Strong Interest Coverage Ratio
Adequate Current and Quick Ratios
Strong Transition to Cybersecurity and Cloud Computing
Expansion of Cloud Infrastructure Services
Unique Edge Platform Advantages
Growth in Security and Compute Segments
Strategic Go-to-Market Overhaul
High EV/EBITDA Ratio
Moderate Operating Profit Margin
Net Profit Margin
High Debt-to-Equity Ratio
Low Cash Ratio
Delivery Revenue Decline
Dependency on Large Customers
Potential Margin Pressure
Akamai is undergoing a significant transformation, transitioning towards cybersecurity and cloud computing with strong growth potential in these areas. However, challenges remain in delivery revenue and dependency on large customers, which could impact future performance. The company's unique edge platform and strategic growth initiatives position it well for the future.
Analysis Date: February 20, 2025
Last Updated: March 11, 2025
Past performance does not guarantee future results. The data presented is indicative and may not be updated in real-time.
Akamai Technologies, Inc. helps make websites and online services faster and safer. They provide cloud services that protect businesses from online threats, like hackers, while also improving how quickly content, like videos and apps, load for users. Think of them as a security guard and a speed booster for the internet, ensuring that websites work well and stay safe. Founded in 1998 and based in Cambridge, Massachusetts, Akamai serves customers around the world.
Core Products
Business Type
Business to Business
Competitive Advantages
Key Business Risks
Latest News
Surge correlates with accelerated adoption of AI-powered applications CAMBRIDGE, Mass. , April 22, 2025 /PRNewswire/ -- Akamai Technologies, Inc. (N...
Tom Yeung here with your Sunday Digest. Last week, I revealed five stocks from Luke's quantitative model.
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Benjamin Graham's value investing approach focuses on finding stocks with a significant margin of safety between their intrinsic value and market price.
Intrinsic Value
Estimated fair value based on Graham's formula
$42.01
Current Market Price: $71.67
IV/P Ratio: 0.59x (>1.0 indicates undervalued)
Margin of Safety
Gap between intrinsic value and market price
-71.0%
Graham recommended a minimum of 20-30% margin of safety
Higher values indicate a greater potential discount to fair value
Graham Criteria Checklist
Benjamin Graham's value investing checklist for AKAM
Positive earnings (5+ years)
Dividend history (5+ years)
P/E ratio ≤ 20 (21.93)
P/B ratio ≤ 1.5 (2.27)
Current ratio ≥ 2.0 (1.23x)
Long-term debt < Net current assets (6.63x)
Margin of safety (-71.0%)
AKAM does not meet all Graham criteria
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Profitability metrics measure a company's ability to generate earnings relative to its revenue, operating costs, and other relevant metrics. Higher values generally indicate better performance.
Return on Equity (ROE)
Measures how efficiently a company uses its equity to generate profits
10.60%
Higher values indicate better returns for shareholders
TTM (as of 2025-04-30)
Gross Profit Margin
Percentage of revenue retained after accounting for cost of goods sold
59.39%
Higher values indicate better efficiency in production
TTM (as of 2025-04-30)
Net Profit Margin
Percentage of revenue retained after accounting for all expenses
12.65%
Higher values indicate better overall profitability
TTM (as of 2025-04-30)
A gross profit margin of 57.51% indicates that the company is able to retain a significant portion of revenue after covering the cost of goods sold, showcasing operational efficiency.
With a return on equity of 10.60%, the company is effectively generating profit from shareholders' equity, which is a positive indication of management performance.
An operating profit margin of 13.47% suggests that while the company is profitable, there may be room for improvement in managing operating expenses relative to revenue.
The net profit margin of 12.65% indicates profitability but is lower than ideal benchmarks, suggesting opportunities for cost reduction or revenue enhancement.
Financial health metrics assess a company's ability to meet its financial obligations and its overall financial stability.
Debt to Equity Ratio
Total debt divided by total equity
0.95x
Lower values indicate less financial leverage and risk
Less than 1.0 is conservative, 1.0-2.0 is moderate, >2.0 indicates high risk
Q4 2024
Current Ratio
Current assets divided by current liabilities
1.23x
Higher values indicate better short-term liquidity
Less than 1.0 is concerning, 1.0-2.0 is adequate, greater than 2.0 is good
Q4 2024
An interest coverage ratio of 18.50 indicates that the company earns significantly more than its interest obligations, demonstrating strong financial health and ability to manage debt.
Both the current ratio (1.23) and quick ratio (1.23) are above 1, suggesting that the company can cover its short-term liabilities comfortably.
A debt-to-equity ratio of 0.95 indicates that the company is utilizing a considerable amount of debt to finance its operations, which could pose risks if not managed well.
With a cash ratio of 0.25, the company may face challenges in meeting short-term obligations with available cash, indicating potential liquidity concerns.
Meeting Expectations
Higher values indicate better execution and credibility
Recent Results
EPS
Akamai has successfully transitioned from a content delivery network (CDN) pioneer to a significant player in the cybersecurity and cloud computing sectors. In 2024, security revenue surpassed $2 billion, accounting for the majority of total revenue, and grew 16% year-over-year.
The cloud computing portfolio recorded impressive growth, with cloud infrastructure services specifically growing 40% to 45% in ARR year-over-year. This indicates strong demand and market acceptance of Akamai's cloud solutions.
Akamai's extensive network of over 4,300 points of presence globally provides significant competitive advantages in performance and cost efficiency, allowing them to offer superior service compared to traditional cloud providers.
Despite the overall positive outlook, the delivery revenue segment is experiencing a decline of about 10%, which signals challenges in that area and potential risks to overall revenue stability.
Akamai anticipates a compound annual growth rate (CAGR) of about 10% for security products and 20% for cloud computing over the next three to five years, with specific growth drivers including new product offerings in Guardicore and API security.
The company is transforming its go-to-market strategy to align with higher growth segments, which is expected to enhance sales productivity and customer acquisition in the long run.
Akamai's largest customer presents a significant revenue headwind, with projections indicating a $60 million impact. This reliance on a few key customers could pose risks to revenue stability.
Projected operating margins for 2025 are expected to decline to around 28%, impacted by depreciation and foreign exchange fluctuations, indicating potential challenges in maintaining profitability.